Lithium prices could climb higher, helped by U.S. climate bill, execs say

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This year's mega-rally in lithium prices could have more room to run, thanks in part to the Biden administration's Inflation Reduction Act, lithium executives said this week at Deutsche Bank's annual lithium and battery supply chain conference in New York.

"Everybody needs lithium," so pricing will remain strong, Albemarle (NYSE:ALB) executive Eric Norris told Bloomberg at the conference, adding the U.S. climate bill may "reignite our M&A."

The company is looking at targets in jurisdictions such as Canada and Australia, which have free trade agreements with the U.S., Norris said.

The IRA's economic incentives should lead to domestic investment in lithium, according to Piedmont Lithium (NASDAQ:PLL) COO Patrick Brindle, whose company received $141.7M in grants for projects aimed at boosting the U.S. electric vehicle battery supply chain.

More than $13B of investment in battery raw material production and battery and EV manufacturing has been announced in the three months since Biden signed IRA into law in mid-August, according to Bloomberg calculations.

Other potentially relevant tickers include (LTHM), (LAC), (SQM), (SGML), (NYSEARCA:LIT), (REMX)

Goldman Sachs recently forecast continued high prices for lithium in the near term, boosted by restocking demand from iron-based electric vehicle battery expansion and higher than expected EV sales in China.

Goldman sees the global lithium market in an 84K-ton deficit this year, compared with a prior forecast of an 8K-ton surplus, but it forecasts supply will begin to outpace demand starting in H2 2023.

Comments

[Gregory Holter]

I added a little bit to my SQM yesterday, to take a little advantage of the recent share price dip.

[CEFJE]

Whatever Pelosi is invested in is a sure thing.

[New Issue Stocks]

Goldman has overlooked two significant points in their forecast.

Tesla has become the number-one-selling EV car in the world. Ford, GM, VW, and all the rest must play catchup. The Chinese manufacturer BYD knows that the future IS the EV. Tesla and BYD are making a profit, but the others are losing money in EVs. In this new environment of the EV, the players have no choice but to make EV cars. If they don't, they will not be around in 30 years. That is why the Chevy Bolt will double production (and sell at a loss), BYD is doubling production, Tesla is doubling production, and the Ford 150 EV truck is ramping up to meet massive demand. People don't realize the significant shift taking place. EV prices will fall fast and be cheaper than gas-guzzling cars soon. It takes 50% less labor to build an EV, and they will last much longer.

If you don't believe me, check out "The Electric Viking" on youtube. This guy is obsessed with EVs and is on top of all the modifications. He publishes several reports every day, and it is worth watching.

The other overlooked topic is the USA pouring free grant money into developing battery production in the USA. They also talk of mining, but it is focused on batteries. If you are knowledgeable about the industry, you know that battery factories take a couple of years to build. The problem is in the mining aspect of Lithium. Mines take 5 to 10 years to produce. So the miners will be the big winners in the next five years.

My two cents.

[Downtown10]

@New Issue Stocks Speaking of batteries, do you have any opinion on Electrovaya (EFLVF)? They are making high quality batteries for material handling electric vehicles (forklifts). They are small, but revenues are strongly growing. They are currently building a battery plant in NY, and are looking to expand their battery technology to stationary power supplies, as well as developing a solid state version of their current battery.

[New Issue Stocks]

@Downtown10 The company is too small for me to look at. Its $ volume trades around $50,000 a day. I don't have an opinion on the company; however, there is a lot of competition, which will grow fast in the next several years with the new government policies.
If I were to invest in any battery producer, it would probably be CATL because of its sodium-ion battery technology.

[Downtown10]

@New Issue Stocks Appreciate the reply & the advice.

[Kadydog1]

SGML ... chk it out! Production starts this mth, fcf by 2nd q 23' ... going to be a major producer. If this isn't in your lithium portfolio, your missing out. Hope that helps someone!

[MktInvestor]

@Kadydog1 Thanks for bubbling up this oft-forgotten stock in this sub-sector.

[Downtown10]

@Kadydog1 I believe that production doesn’t start until March, but I agree that this stock (even after a triple in the last year) is still one of the most undervalued material plays out there. Projected to earn $24/share in 2024, selling under $40 still.

After updating their resources they tripled their NPV from $5B (in May 2022) to $15B now. Market cap currently at $3.7B.

ir.sigmalithiumresources.com/...

This company will become a cash flow machine going forward.

[New Issue Stocks]

@Downtown10 I will add one more overlooked item.
They are dry stacking the tailings. Those tailings are sellable for tier 2,3,4 battery material because they are still lithium-rich (1.5%). The current price is about $1,000 a ton. They plan to sell it to the same buyer as their main product and shipped out in the same tanker, so there is no extra cost to deliver. They stated that roughly 15% of their production will be tailings.
The first year will have 300,000 tons of tailings at $1,000 a ton, which is $300 million in cash that is pure profit added to the bottom line. That goes up to $900 million in the second year. If it comes true, you can add $3.00 a share in the first year and $9.00 a share in the second year.
And the beauty of this is no debt is incurred from dealing with tailing waste.

No one is talking about the rich tailings being a cash line item. It is not in their earnings estimates because the price for tailings can not be pegged.

These numbers sound like a fantasy, but they make it plausible.

Listen to the answered question around 2:37 into this presentation several months ago.

vimeo.com/...

Best of luck

[ComputerBlue]

As long as the fed balance sheet grows, all other assets will too

[Zheeeem]

@ComputerBlue But the Fed is shrinking its balance sheet...

[ComputerBlue]

@Zheeeem about 8 months later than originally stated too...and barely

[Zheeeem]

@ComputerBlue $95 billion a month is not exactly "barely".

[katmandu100]

Good info.

[RickinMiami]

Missing $MP

[edena01]

@RickinMiami MP doesn’t produce lithium. Great company though

[Gregory Holter]

@edena01 @RickinMiami CMP has a lithium play going, FWIW.

[nidneurons]

So to have a surplus in 2H23 what companies are coming to produce according to Holman Sachs?

[jirwin1414]

@nidneurons "Goldman sees the global lithium market in an 84K-ton deficit this year, compared with a prior forecast of an 8K-ton surplus" minor miscalculation. #Bullish

[Downtown10]

@nidneurons I doubt we will have a surplus, but LAC and SGML are both entering a production phase (for the first time) within the next couple of months.

[Watsonator]

Have to laugh at Goldmans back peddling. I don't trust their forecasts further than I can spit.

[the_man_with_the_golden_berg]

@Watsonator free advice is worth exactly what you paid for it!

[alex.c]

@the_man_with_the_golden_berg
market manipulation...

[Gregory Holter]

Some of the lithium stocks seem to be taking a breather right now, and that may provide some nice buy opportunities. I am hoping share prices will pull back a little further so I can add to my holdings at a better price.

[MktInvestor]

@Gregory Holter Yes, they have dropped in recent weeks.

[vireoman]

Reaffirming what lithium investors already know.

[jhod58]

Giant scam

[Zheeeem]

@jhod58 In what way is the rising price of lithium a "giant scam"?

[alex.c]

@jhod58 maybe. Need to verify everything these days.
But maybe you have some information which would help us verify?

[ronfab1]

@jhod58 .... show up .... throw a bomb .... disappear .... perfect.